A last-minute attempt by the Arlington Hospital Foundation to intervene in the proposed sale of Northern Virginia Doctors Hospital in Arlington to an out-of-state hospital management firm has set the stage for a proxy battle at a Doctors Hospital shareholders meeting Wednesday.
Seeking to block the proposed sale of Doctors Hospital to the Tennessee-based Hospital Corp. of America, the foundation that owns Arlington Community Hospital is planning to make its own bid to buy Doctors Hospital at the upcoming meeting.
But in a letter dated Friday, Dr. John E. Alexander, president of the Doctors Hospital board, called the foundation offer "ambiguous and uncertain," and urged shareholders to follow the directors' lead in voting for the sale.
The meeting has been called to approve the recommendation of the hospital's parent corporation, Northern Virginia Doctors Hospital, Inc., that shareholders accept HCA's offer to buy Doctors Hospital for $19.2 million and continue to run the 225-bed facility as a profit-making hospital.
The Arlington Hospital Foundation is offering to buy Doctors Hospital after leasing it for one year for $20.1 million and run it as a nonprofit facility. The foundation has sent letters, some of them hand-delivered, to all shareholders explaining its bid and seeking their proxy votes to approve the offer at the meeting, said Kenneth M. Haggerty, the foundation's president and board chairman.
"We have very strong expectations that we will win this contest," said Haggerty, a dentist who served on the Arlington County Board for eight years, including one as its chairman.
Haggerty said that the foundation's acquisition of Doctors Hospital "would work to the benefit of the community, as opposed to them selling it to a national profit-making organization such as Hospital Corp. of America.".
Haggerty also said that Arlington Community Hospital, which offers substantial free care through public clinics, would suffer through competition with the profit-making facility HCA presumably would operate if its approximately $19-a-share offer is accepted.
Hospital Corp. of America, a $3.5 billion-a-year firm that owns or manages some 350 hospitals in 41 states, already is embroiled in one local controversy. HCA owns Circle Terrace Hospital in Alexandria and the Dominion Psychiatric Treatment Center in Falls Church, and last month proposed closing both facilities and building a new 225-bed hospital near Reston. The plan is opposed by the nonprofit Fairfax Hospital Association, which hopes eventually to open a facility in western Fairfax.
Haggerty said the foundation would seek to operate Doctors Hospital as a nonprofit facility "in an era when the costs of hospital care are paramount in everyone's minds." By owning both Doctors Hospital and the 350-bed Arlington Community Hospital, which are only three miles apart, Haggerty suggested, the two facilities would not compete to buy expensive equipment and would work together. Alexander's letter to shareholders said, however, that the board has been advised by its lawyers that a merger of the two hospitals would raise serious antitrust questions.
Haggerty said that the foundation, which was established two years ago as a nonprofit corporation, has a guaranteed loan from its subsidiary, Arlington Community Hospital, to buy Doctors Hospital, but that it would try to sell tax-exempt bonds that would make the loan unnecessary.
Haggerty said that the foundation is appealing to Doctors Hospital shareholders on two counts: its offer of $20.1 million gives them72 cents more per share than the Hospital Corp. bid and, secondly, "it would be better for the local community to maintain the decision capacity, as opposed to a conglomerate from Tennessee."
Alexander's letter calls the foundation's financing proposals "unclear and uncertain," and says that Doctors Hospital's directors "are not willing to speculate that AHF will be successful in raising the money it needs." Alexander said that HCA offers "not only fair value, but certain value" to stockholders.